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Packaging Sector Update Of 08-25-16

2016 has been a very good year for several packaging sector stocks. At the same time, EPS projections remain volatile. And that leads to five year CAGR projections that are also volatile. That is a very bad thing. With yields lower than average due to superior growth trends - the valuations (which are always a 'yield + CAGR' thing) can be volatile due to most of the valuation being based on the CAGR. The data:

Packaging Sector 08-25-16

The Q3-16 dividend is used for yield calculations. The second Dividend/EPS ratio has the 2017 EPS projection as the denominator. "Div 1 yr" measures the change in the dividend since Q3-15. "Div 5 yr" measures the average change in the dividend since Q3-11. In 2015 RKT combined with MeadWestvaco (MWV) to form WestRock (NYSE:WRK). On 1-30 RKT declared a dividend of $0.320525/share, reflecting the regular quarterly dividend payment of $0.1875 per share plus an additional amount of $0.133025 per share which equalizes the absolute dividend between RockTenn and MeadWestvaco. This moved the payout ratio from 18% to 30%. On 7-01 WRK declared a dividend of $0.375/share. KapStone (NYSE:KS) - with a 2.2% yield and 10% CAGR - should be added once newly initiated dividend has LTM growth. I need to add Graphic Packaging Holding Company (NYSE:GPK) which has a $4.5 billion market cap; a 1.40% yield and a 15.63% CAGR. The IP spin-off of Veritiv in mid 2014 was treated as a 1014 : 1000 Stock Split in the Yahoo stats. The ratio was so small that I chose to ignore it with my data.


    12-31-15 08-25 Div Current Div/ Div/ Percent Change
Company Price Price /Quarter Yield EPS16 EPS17 Price Pr+Div EPS16 Target Div 1yr Div 5yr

Aptar Group, Inc. (NYSE:ATR) 72.65 78.07 0.300 1.54 38 % 34 % 7.46 8.70 -2.45 5.15 7.14 7.27
Ball Corporation (NYSE:BLL) 72.73 79.82 0.130 0.65 15 % 12 % 9.75 10.11 -7.28 6.52 0.00 17.14
Bemis Company, Inc. (NYSE:BMS) 44.69 52.00 0.290 2.23 43 % 38 % 16.36 17.65 -0.37 13.72 3.57 4.17
Greif, Inc. (NYSE:GEF) 30.81 42.68 0.420 3.94 73 % 65 % 38.53 41.25 3.15 6.00 0.00 0.00
PH Glatfelter (NYSE:GLT) 18.44 22.08 0.125 2.26 34 % 28 % 19.74 21.77 -7.50 -5.60 4.17 7.78
International Paper Company (NYSE:IP) 37.70 48.39 0.440 3.64 51 % 48 % 28.36 30.69 -10.54 -8.29 10.00 13.46
Mobile Mini, Inc. (NASDAQ:MINI) 31.13 29.93 0.205 2.74 62 % 51 % -3.85 -2.54 -14.74 -16.73 9.33 Infinity
Packaging Corporation of America (NYSE:PKG) 63.05 78.69 0.550 2.80 46 % 45 % 24.81 27.42 -1.85 2.79 0.00 35.00
WestRock Company   45.62 47.07 0.375 3.19 59 % 56 % 3.18 5.64 -38.26 0.00 0.00 55.00
Sealed Air Corporation (NYSE:SEE) 44.60 47.68 0.160 1.34 25 % 21 % 6.91 7.62 0.78 -0.75 23.08 4.62
Silgan Holdings Inc. (NASDAQ:SLGN) 53.72 48.00 0.170 1.42 24 % 21 % -10.65 -10.01 -7.87 -1.47 6.25 10.91
Sonoco Products Co. (NYSE:SON) 40.87 51.76 0.370 2.86 54 % 51 % 26.65 28.46 1.12 11.29 5.71 5.52
West Pharmaceutical Services (NYSE:WST) 60.22 81.05 0.120 0.59 22 % 18 % 34.59 35.19 3.72 17.81 9.09 8.24

Average         2.25 42 % 38 % 15.52 17.07 -6.31 2.34 6.03 15.37

The SPY (S&P 500 EFT) is up 6.78% year to date. - and with unreinvested dividends is up 7.83% year to date.
The VSI (Vanguard Industrials ETF) is up 10.82% year to date. - and with unreinvested dividends is up 11.80% year to date.
With the 10 Treasury at 1.56% and the sector average yield on Q3 Dividends at 2.25% - the spread is 69 basis points.
* The change in the dividend is for the last twelve months and not year to date.

Price/Earnings Ratios 08-25
WRK starts fiscal 2017 at the beginning of calendar Q4-16. I guesstiated the 18 projection for MINI


  EPS / Share % EPS Growth Price/EPS 16 EPS Range
Co. 2014 2015 2016 2017 2018 14-15 15-16 16-17 17-18 2016 2017 2018 High Low Range

ATR 2.86 3.00 3.18 3.49 3.90 4.90 6.00 9.75 11.75 24.55 22.37 20.02 3.45 3.05 12.58%
BLL 3.88 3.48 3.44 4.30 5.08 -10.31 -1.15 25.00 18.14 23.20 18.56 15.71 3.80 3.30 14.53%
BMS 2.30 2.55 2.72 3.04 3.33 10.87 6.67 11.76 9.54 19.12 17.11 15.62 2.85 2.68 6.25%
GEF 2.36 2.18 2.29 2.59 3.00 -7.63 5.05 13.10 15.83 18.64 16.48 14.23 2.31 2.15 6.99%
GLT 1.55 1.34 1.48 1.79 2.10 -13.55 10.45 20.95 17.32 14.92 12.34 10.51 1.75 1.35 27.03%
IP 3.00 3.65 3.48 3.67 3.98 21.67 -4.66 5.46 8.45 13.91 13.19 12.16 3.65 3.10 15.80%
MINI 1.09 1.32 1.33 1.60 1.78 21.10 0.76 20.30 11.25 22.50 18.71 16.81 1.58 1.40 13.53%
PKG 4.66 4.53 4.78 4.91 5.42 -2.79 5.52 2.72 10.39 16.46 16.03 14.52 4.60 4.05 11.51%
WRK 3.76 3.96 2.55 2.70 3.02 5.32 -35.61 5.88 11.85 18.46 17.43 15.59 2.66 2.66 0.00%
SEE 1.86 2.59 2.60 3.00 3.29 39.25 0.39 15.38 9.67 18.34 15.89 14.49 2.71 2.52 7.31%
SLGN 3.17 2.97 2.81 3.25 3.67 -6.31 -5.39 15.66 12.92 17.08 14.77 13.08 2.95 2.85 3.56%
SON 2.54 2.51 2.72 2.91 3.13 -1.18 8.37 6.99 7.56 19.03 17.79 16.54 2.74 2.65 3.31%
WST 1.78 1.83 2.23 2.64 3.10 2.81 21.86 18.39 17.42 36.35 30.70 26.15 2.20 2.15 2.24%

Average           1.40 13.18 12.47 20.20 17.80 15.80  

Why invest in this sector? Look at the earnings growth.

Should you invest in the sector now? The 'yield + CAGRs' are not currently attractive.

How should you invest in the sector? Buy in slowly due to pricing volatility. Be more diversified than average while having smaller weightings in each holding due to CAGR projection volatility.

Am I happy with my holdings of PKG and WRK? Not exactly. The total returns have been poor while the dividend growth since purchase has been great. I was not expecting this much earnings projection volatility - which leads to price volatility. I have not sold due to the 'wait till next year' optimism I have with this group.

Disclosure: I am/we are long PKG, WRK.